Ariel Ezrachi on ‘EU Competition Law Goals and The Digital Economy’ (2018) Report for BEUC – The European Consumer Organisation

This paper – which can be found here – remarks that questions regarding whether certain conducts pose competition problems have become increasingly common in the face of new business strategies, new forms of interaction with consumers, the accumulation of data and the use of big analytics. It argues that answers can only be provided by taking into account the goals and legal framework of specific competition regimes.

The author focuses on the EU. The paper thus outlines the goals and values of European Competition law, and looks at how they apply to digital markets.

The report is structured as follows:

The paper begins with an introduction to the constitutional foundations of European Competition law.

Competition policy is one of several instruments used to advance the goals of the European Treaties. In this context, competition rules must be interpreted in the light of the wider normative values of the EU. These are not limited to economic goals such as promoting consumer welfare, but also comprise other values: equality, consumer protection, social protection, public health, environmental concerns, investment, transportation, and regional development. The implication is that the pluralism of values underpinning EU competition law affect its scope, placing it in conflict with narrower, economic analytical approaches that focus exclusively on promoting efficiency or enhancing consumer surplus. While economics plays a crucial role in shaping competition enforcement, it must be subsumed to the EU’s economic, political and social context.

The paper then considers the core goals of EU competition law.

The goals of European Competition law centre on consumer welfare. While consumer welfare hints toward a clear economic benchmark, it does not embody universally agreed properties: different views exist as to its scope, measurement and means of promotion. In an attempt to transform the consumer welfare standard into workable benchmarks, competition authorities have often equated it with consumer surplus.

However, the European Courts have long held that competition law is not only aimed at practices which may cause damage to consumers directly, but also at those which are detrimental to them through their impact on an effective competition structure. A focus on the structure of the market protects consumers indirectly, because where competition as such is damaged, disadvantages for consumers are also to be feared. This means that a finding of anticompetitive conduct does not require evidence of direct harm to consumers.

A third goal of EU competition law is the efficient allocation of resources for the benefit of consumers. While efficiency considerations are of central significance in EU competition law, they are entwined with the promotion of consumer welfare and conditioned on consumers benefiting from them. A fourth goal of European competition law is fairness, which has triggered intervention in some cases, particularly those involving exploitative prices imposed on consumers. A fifth goal of European competition law is economic plurality / freedom of choice, which are inherently linked to the quest for an effective competition structure. The significance of economic plurality transcends the market economy and may be normatively connected to the broader concern of ensuring a healthy political process, unimpaired by distortions induced by powerful firms. A sixth and last goal is market integration.

Each of these core goals is reviewed in detail as to their impact on the digital economy. In the interest of brevity – and because this review does not seem to play an important role in the rest of the paper – I will omit that part of the discussion here, but it is extremely worthwhile. I may review this part of the paper in greater detail in the future.

A third section looks at the role that economics plays in competition law.

Broad consensus exists as to the crucial role that economics plays in shaping competition enforcement and intervention. However, controversy remains as to the extent to which economisation may substitute legal norms and lead to the erosion of non-efficiency objectives. Ezrachi reviews this controversy, and concludes that different competition agencies and scholars across Europe may well have different views on the optimal balance between law and economics, as well as on the latter’s ability to fully reflect the goals and values of European competition law. This multitude of views is inevitable and not unique to Europe. It may be further subject to transformation as competition policy adjusts over time; what is unavoidable, however, is that EU competition law must be applied in the context of the European Treaties and the various goals reviewed in the second section.

A fourth section then looks at the place of European competition law in an international context.

While competition laws around the world reflect large degrees of consensus as to their goals, they remain distinct to the extent that they promote or place emphasis on a range of variegated values. As such, competition law cannot be implemented as if in a vacuum. Such implementation disregards local institutional designs and legal frameworks. International convergence of competition laws, while beneficial, cannot lead to full alignment or to the overriding of national peculiarities.

From this standpoint, the author then considers what impact the US debate on the extended role of antitrust brought about by the Neo-Brandeisians should have in Europe. He considers that, while the US debate is of great interest, it should be distinguished from the situation in the EU, where detailed intervention benchmarks are framed within the wider normative values set forth in the EU Treaties. An attempt to implant the US debate in the European context ignores this framework, the established scope of EU competition law, EU institutional design, and stable jurisprudence. Furthermore, it mistakenly assumes an international alignment to the US model.

The paper concludes with reflections on the scope of EU competition law and the adequate level of intervention.

In particular, it argues that, while EU competition law may have multiple goals, this should not be seen as an invitation for broad and unpredictable discretion. Furthermore, these goals do not dictate how enforcement should be pursued. As such, acknowledging the multiplicity of competition goals does not preclude one from arguing in favour of limited intervention, or challenging the use of European competition law in different markets. What is key is that claims on the desirability of intervention must be understood within the framework of the goals pursued by EU competition law.

Comment:

This is, unsurprisingly, a very solid paper. I enjoyed its emphasis on how discussions about the nature of competition enforcement must reflect the legal framework of each jurisdiction, and its extensive review of EU competition law’s goals.

I particularly enjoyed the discussion of the differences between consumer welfare, competitive process and efficiencies – while I think they could be analytically packaged as comprising different dimensions of consumer welfare latu sensu, it is useful to deal with each of them separately to see the differences between them and in the practical implementation of each goal. As to the other goals, I thought that the discussion on economic freedom could do with an express reference to the ordo-liberal origins of EU competition law. I was also not taken by the discussion on fairness. Fairness is described as a remarkably vague concept, which allows the author to push for new forms of intervention. This argument for new types of intervention would benefit from a more detailed discussion regarding why competition law should be used to deal with unfair practices that would normally fall under the scope of other areas of law (e.g. consumer protection, data protection, unfair competition, etc.).